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Tax Refund, Good or Bad?in KD Professional Accounting Services News
According to the CIBC poll, it seems that most Canadians who expect a tax refund will be resisting the urge to spend the money on luxury such as vacations or shopping sprees. Nearly three quarters or 72% of respondents plan to pay down debt, invest or save it.
On the article, “Average tax return $1506: CIBC,” written by Jamie Golombek, he says that “a tax refund typically arises when the amount of tax owing on your return is less than the amount of tax withheld from your income during the year.”
Although getting money from the government is always a good thing, it is not so on a tax planning perspective. First of all, getting a tax refund means that you have overpayed your taxes. Overpaying your taxes is like giving away free money when you could have used it for something more worthwhile. Secondly, getting a tax refund is a sign of poor tax planning – the government held back your money for a year with no interest whatsoever. You could have used the money to pay down your credit card bill that racks up to 21% in interest or you could have invested it and made more money off of it.
So how do you avoid a tax refund? The only thing you could do is set up a tax plan and see the ways you can make your money work for you instead of “loaning” it to the government. See a professional to help you with your tax plan. Remember, the earlier you set up a tax plan, the better!
- “Average tax return $1506: CIBC” by Jamie Golombek, Financial Post, May 6, 2011, http://www.financialpost.com/personal-finance/taxes/Average+return+CIBC/4740649/story.html